Business Basics: Managing a Budget

By: Amalya Teitelbaum  |  February 11, 2022

By Amalya Teitelbaum, Business Editor & Manager

A budget can be defined as an estimate of income and expenditure for a set period of time. A budget can be a complicated term with an even more complicated definition.hen broken down, however, it is not nearly as complex as it seems.

Budgets can be established for company purposes or an individual can establish a budget to save and utilize money wisely. In any case, there are several important factors to maintaining a responsible and well-prioritized budget. From the onset of establishing a budget, it’s important to be realistic about your budget and your budget goals. Perhaps you’re creating a budget to save, to invest, or to plan a vacation. Perhaps you wish to start paying off your tuition debt or are planning a retirement fund. Being realistic and recognizing your ultimate goal will assist you plan your budget.

Next, you must determine your income and expenses. Income is money received from work or through investments and can be anything from a biweekly paycheck to a monthly allowance you receive from your parents. Once you determine your income, you then have to break down your expenses, or necessities. Expenses can fluctuate depending on your stage of life and current situation. For a university student, for instance, expenses may consist of textbooks, dorming, etc. After university, it may be rent, food, clothing, etc. An integral part of establishing your expenses is distinguishing between  your needs  and your wants. 

After establishing your budget goals, income, expenses, needs, and wants, the next step is to apply the 50/30/20 rule. The 50/30/20 rule breaks down one’s budget so that they are spending 50% on necessities, 30% on luxuries, and 20% on savings or debt. The 50/30/20 rule is a great tool for those who wish to work within the realms of a simple budget or for those just getting started. However, it’s important to note that while this is an excellent rule of thumb, it does not apply to every individual. For those with higher expenses, the 70/20/10 rule– 70% on necessities, 20% on savings or investments, and 10% on university or other potential debt– may be more appropriate. 

Once an individual or company designs its budget, it’s time to put it into action. Make sure your spending matches your income, your payments are completed in advance, and that you have money set aside for unexpected expenses. A budget is a living breathing model, it never will exist as a stagnant idea. It is essential for a budget executive to perpetually check-in to make sure the budget is organized. Lastly, it is important to always look towards the future, you can not just hit the ground running when it comes to budgets.

Have you prepared your budget? Have you analyzed your budget? Have you executed your budget? Have you evaluated your budget? It is only after one answers these questions can they truly establish a functional budget.